Senator Hontiveros Demands Meralco Refund Billions Before Franchise Renewal

Senator Risa Hontiveros has insisted that Meralco, the Philippines’ largest power distributor, should refund an estimated PHP100 billion to consumers for alleged overcharges before its franchise is renewed. Speaking during discussions on Meralco’s franchise renewal, Hontiveros committed to advocating for a Senate inquiry into the company’s pricing strategies prior to any franchise extension. She highlighted that Meralco’s franchise renewal is not due until 2028, providing sufficient time to address these issues and ensure refunds are made to consumers. Hontiveros criticized Meralco for allegedly inflating electricity costs through various methods, including a higher weighted average cost of capital, an inflated regulatory asset base, and double-charging for inflation since 2012. She argued that these practices have led to excessive consumer charges while boosting Meralco’s profits. Hontiveros urged the Energy Regulatory Commission to ensure electricity is provided at the lowest possible cost without unnecessary charges. She plans to introduce a Senate resolution to prompt an investigation into these overcharges, stressing the importance of a thorough and transparent audit for consumer benefit. In response, Meralco denied the overcharging allegations, asserting that it cannot set rates independently and that the ERC is responsible for rate determination. Meralco clarified that its weighted average cost of capital is set by the regulator and that the last approved rate was in 2011 for a period ending in 2015. The company also noted that power rates are subject to periodic reviews, which can lead to adjustments like refunds or additional charges. Meralco emphasized that its WACC was the lowest among similar utilities during the specified period and that it does not recover corporate income tax, resulting in a net WACC of about 10.5 percent. Since 2015, the ERC has not reset rates or determined a new WACC for Meralco and other distribution utilities. Meralco applied for an interim rate of PHP1.39 per kilowatt-hour, which was adjusted to PHP1.3810 after hearings. In 2022, the ERC finalized Meralco’s rate at PHP1.3522 per kilowatt-hour for the period from July 1, 2015, to June 30, 2022, and ordered a PHP48 billion refund, which Meralco complied with from 2021 to 2023. Meralco reaffirmed its commitment to adhering to regulatory standards and franchise obligations.